What tax are you paying on your wages

Trying to understand the tax on your wage slip in Ireland can be quite difficult. When looking at your payslip you will see PAYE, PRSI EE, PRSI ER and USC LEVY. All of these taxes are took out of each persons pay. The PAYE, PRSI EE, and USC are the taxes the employee pay. The PRSI ER is what the employer has to pay for having a employee working for them.

Over the last few years the government have gradually reduced the Tax Credits and the Tax Bands. These are the figure as of January 2012.

TAX CREDIT : At the moment the Tax Credit and the PAYE credit for a single person is (1650 yearly)/ (31.73 weekly). When the total tax has been calculated in relation of your gross pay, the two figures of 31.73 will be deducted from that total tax due.

TAX BAND : In one year a single person can earn up to 32,800 (2733.33 monthly) / ( 630.77 weekly) and pay tax at 20%, the remaining balance will then be taxed at 41%.

When you are told you are going to earn €500 a week before tax you need to consider that by the time all the tax is deducted your wages could be down €70.00.

EXAMPLE 1

Wage is €500 * USC@ 4% = €20.00 (FIRST TAX)

Gross Std Rate Cut Off €630.77

Tax @ 20% : 500.00 x 20%= 100 (The reason you are using 20% here, is because it's only when your weekly wage goes over 630.77 that you tax the balance after 500.00 at 41%.

Tax Credit : 31.74 x 2= 63.48

Total Tax Due : 100 - 63.48 = 36.52 ( SECOND TAX)

Calculating PRSI:

Depending on the class you are in this will vary. For this example I am going with a person under 66 years of age who can be working in the public/private sector.

Wage is again 500.00. The first 127.00 of this will be taxed at nil. The balance of 373.00 will then be taxed at 4%. So that is 373..00 x 4% = 14.92.(THIRD TAX)

So you subtract the 3 taxes 20.00 + 36.52 + 14.92 which come to 71.44 from your 500.00 and you earn a wage of 428.56

Employer PRSI : the 500 is taxed at 10.75% which is 53.75.

Universal Social Charge

If your yearly income is:

- 0 to €10,036 the rates will be 2%

- €10,037 and €16,016 the rate is 4%

- Anything over €16,016 the rate is 7%

PAYE - Pay As You Earn . you pay the revenue a portion of your wages.

PRSI ee

This charge is a combination of Social Insurance, Health Levy, and the National Training Fund Levy. To figure out the amount that you will need to pay, it comes down to what wage you earn and,the circumstance you are in, which determines your class. The majority of people will fall into class Ax / Al/ A1/A2. The more you earn effect with class you end up in.

See welfare.ie for more details on PRSI classes.